Divorce is a challenging process for anyone, but for a business owner, it can be particularly complex. Balancing the emotional strain of a separation with the practical concerns of protecting your business can feel overwhelming. Experienced family lawyers understand the unique challenges faced by entrepreneurs during divorce. Here are some key considerations and strategies to help you navigate this difficult time.
1. Understand the Impact on Your Business
One of the first steps is to understand how divorce can affect your business. In England and Wales, all assets, including business interests, are considered when dividing matrimonial property. This means your business could be subject to valuation to determine its value, liquidity and any opportunities to extract capital from it.
The courts are generally reluctant to order the sale of a business. Instead, more frequently, the business owning spouse will retain the business whilst the non-business owning spouse will retain more of the copper-bottomed assets outside of the business such as property and non-business related capital to represent their matrimonial interest in the business.
This enables businesses to continue running and yielding an income for the owning spouse.
In circumstances where both spouses are owners of the business, consideration will have to be given to whether it is possible for that to continue. If one spouse is a minority shareholder, it may be that their shares are transferred to the spouse holding a majority shareholding.
The court favours a “clean-break” in so far as is possible when it comes to finances on divorce, however, whether that is possible, particularly if there is parity between spouses in terms of their shareholding, will be dependent on the circumstances of each individual case.
2. Seek Professional Advice
Engage with professionals who can provide expert advice tailored to your situation. Dealing with business assets on divorce can be complex and it is in any business owner’s best interests to seek specialist family law advice. In addition, it is often beneficial to involve the businesses accountant.
There are various ways in which discussions regarding the division of assets including business assets can be dealt with on divorce and it is important to ensure that you are fully aware of all of your options and that you receive specialist advice.
3. Consider a Prenuptial or Postnuptial Agreement
If you are not considering divorce but are engaged or married, you can consider having a prenuptial or postnuptial agreement prepared. These agreements can outline how business assets will be handled in the event of a divorce, providing clarity and protection for both parties.
4. Protecting Business Operations
To ensure your business continues to operate smoothly during the divorce process and that you are able to provide the information that may well be necessary during divorce:
- Maintain Clear Records: Keep detailed financial records and documentation.
- Separate Personal and Business Finances: Avoid mixing personal expenses with business accounts.
- Communicate with Key People in the Business: Whether it’s co-directors, senior staff, investors, or long-term clients, keeping the right people informed can help maintain confidence and stability.
- Reassure Your Team: If your divorce might affect day-to-day operations, be transparent with your employees where appropriate, and provide reassurance about the continuity of the business.
5. Negotiation and Settlement
Aim for amicable negotiations to reach a settlement that protects your business interests. Mediation can be a valuable tool in this process, helping both parties to communicate effectively and find common ground. Collaborative Law and other forms of Non-Court Dispute Resolution are valuable tools available to you maintain confidentiality and reach an amicable and dignified solution that is bespoke to yours and your estranged spouse’s circumstances.
6. Consider Future Implications
Think about the long-term implications of the divorce on your business. This includes potential changes in ownership, management, and financial planning. Preparing for these changes can help mitigate risks and ensure the continued success of your business.
7. Emotional Well-being
Divorce is not just a legal and financial process; it’s an emotional journey. Take care of your mental health by seeking support from friends, family, or a therapist. Balancing your emotional well-being with the demands of running a business is crucial for navigating this challenging time.
Conclusion
Divorce as a business owner requires careful planning and professional guidance. By understanding the impact on your business, seeking expert advice, and focusing on amicable negotiations, you can protect your business interests while navigating your divorce.
How can we help?
Emma Davies is a Partner in our Family Law team, which is ranked in Tier One in the independently researched publication, The Legal 500.
Emma specialises in divorce and financial settlements, which involve complex issues and substantial assets. She also advises on pre- and post-nuptial agreements, cohabitation agreements and separation agreements, along with private law Children Act disputes. Emma is a qualified collaborative law and Resolution Together practitioner.
If you need further advice on the subjects discussed above, please contact us and we will be happy to discuss your circumstances in more detail and give you more information about the services that our family law solicitors can provide, along with details of our hourly rates and fixed fee services.
For more information or advice, please call Emma or another member of our team in Derby, Leicester or Nottingham on 0800 024 1976 or contact us via our online form.
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